November 2008

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Hiring mistakes start-up companies should avoid

November, 2008

Challenges that merely annoy an established firm often capsize a start-up company. This is especially true in the area of staffing. When a big corporation makes a hiring mistake—bringing in a natural-born accountant to do a sales job, for example — the company suffers, but survives. Committed by a fledgling firm, the same mistake may spell disaster. After all, if your company employs only five people, one wrongly hired employee will make up a fifth of your work force. That person's incompetence or poor people skills can bludgeon the firm's bottom line.

Following are three of the most common hiring mistakes made by start-up companies. Avoid these blunders and you'll be well on your way to building a productive team.

  • Staffing the firm with friends and family. While this strategy may work in some circumstances, hiring pals and relatives often spells trouble. For one thing, friends and family members often expect — even subconsciously — to be treated differently from other employees. Such a double standard, whether real or perceived, can hurt morale and productivity. As a general rule, hiring decisions should focus solely on the needs of the firm and applicant qualifications.
  • Trusting in a handshake. Memories fade. Expectations fluctuate. As with other important aspects of your business, employee arrangements should be laid out in clearly written documents. This can be as simple as drafting employee offer letters that cover compensation, rights to intellectual property, and bonus arrangements. Employee handbooks are also a good way to spell out the responsibilities of the firm and its staff. Many a business has been injured by a disgruntled employee who claims the firm did him wrong. Without a written contract or other document laying out company and employee responsibilities, the firm may have no legal recourse against such claims.
  • Bringing in a partner for the wrong reasons. Sure, you might save money in the short term by selling a portion of your firm to a partner. But think long and hard about the downside risks. Do you really need to surrender a portion of your company — including control over important management decisions — to someone else? What will this partner contribute? Can you find other ways to fill gaps in your team? Remember, a bad partnership may end up in the business equivalent of divorce court. So choose wisely.

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